Facebook COO: Small Business Is Web's Holy Grail

Christine Lagorio-Chafkin is a writer, editor, and reporter whose work has appeared in The New York Times, The Washington Post, theSan Francisco Chronicle, The Village Voice, and The Believer, among other publications. She is a senior writer at Inc.

Amid a week of pitching Madison Avenue on the value of Facebook advertising, Facebook COO Sheryl Sandberg took a moment Tuesday evening to talk mom-and-pop shops.

"Small business is something I've banged my head on; a lot of us have banged our heads on this," she said during an after-hours Q&A session with reporters at the IAB MIXX Conference, which is part of Advertising Week in New York City.

Sandberg was referring to Facebook's Main Street roadblock: The smallest businesses in the United States--which comprise 70% of all U.S. businesses--are the latest adopters to new technology. But as mobile ads grow increasingly lucrative, and Facebook ramps up its focus on monetization, the company is hoping to woo brick-and-mortar companies with new products, such as Offers and Promoted Posts.

She called small business the "holy grail" of advertising online, and said Facebook is uniquely suited to capture it: "The rest of the advertising market is not set up for local targeting."

As 40% of small businesses in the United States have zero Web presence, Sandberg says Facebook has one lucky advantage in courting Main Street.

"Without trying, we have the largest adoption online for this category," she said, noting that more than 3 million small businesses post something on Facebook each week. "That's because the product they are using is very similar to the experience they have first as individuals using Facebook. It's someplace they feel comfortable."

She also suggested that advertising is changing in nature. It's not only going mobile, but metrics are shifting, from a click-based model, to an engagement-centered ecosystem. Sandberg said Facebook's brand-awareness is 30% higher than that across the Web as a whole, and ad recall is twice as good.

We are the largest and most engaged community of people anywhere in the world and that gives businesses an opportunity to transform their relationships. Rather than just talk at large groups of anonymous people, businesses can relate to a consumer and establish an ongoing relationship. And importantly, that consumer has an average of 130 friends there. So when I'm talking about that consumer, that person brings their friends along.

Earlier in the week, Sandberg appeared on MSNBC, launching what the Los Angeles Times called a "charm offensive" over Facebook's business potential to Wall Street and Madison Avenue. She's aiming to repair Facebook's reputation after the company's public offering this May, since which its stock has lost almost 50% of its value.

Sandberg appeared alongside venture capitalist Marc andreessen, in a talk with legendary interviewer Charlie Rose at the conference. Rose asked her how the fallout has affected the company's morale.

"It didn't go as we expected. We were obviously surprised and disappointed," she said. "I think people think, 'Oh my God, all of Facebook must be in tatters because this has been so hard in the press. While certainly people were disappointed, Silicon Valley companies, we cycle quickly."

Andreessen, a longtime advisor to Mark Zuckerberg, and a Facebook board member, spun a whole skein of optimism as well.

"I think Facebook is a once-in-a decade company that you kind of aspire to be a part of," Andreessen said, noting that his own stock lock-up expires in two months. "I'm going to sell exactly enough of the shares to pay the taxes." Investor Don Graham is doing the same, according to an SEC filing, but investor Peter Thiel has already sold off the majority of his shares.

Andreessen's optimism for Facebook in particular and start-ups in general was broken only momentarily when Rose asked a key question: He wanted to know if Andreessen thought the start-up boom amounted to a bubble.

There's no bubble. There's not even a little tiny even little trace of a bubble. It's the opposite of a bubble. We had a bubble; it was in 2000. This is what's funny: Everybody worries about the bubble when there's no bubble. When there's a bubble, they stop worrying about the bubble--which is what makes a bubble. The whole theory of a bubble is that everybody becomes completely convinced that it's completely rational.

Rose asked Andreessen and Sandberg if they would want their children to grow up to be computer programmers.

"Absolutely," they said in near unison. Sandberg said she sent her son, who is 7 years old, to a programming camp at Stanford University recently.

Asked finally for predictions on what they'd be discussing in five years, Andreessen (half?) joked: "Hopefully not the crash of the great tech bubble of 2012. That would be extremely embarassing."